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The Role of Transaction Costs and Risk Premia in the Determination of Climate Change Policy Responses

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Author Info
Stronzik, Marcus
Hunt, Alistair
Eckermann, Frauke
Taylor, Tim

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Abstract

Transaction costs and risk have generally not been taken into account in assessing the Kyoto mechanisms JI, CDM and emissions trading. However, they can have a significant influence. With regard to the project-based mechanisms, the factor that most determines the influence of transaction costs on the implementation of a project is the size of the particular project. For some projects transaction costs amount up to over 1000 ?/ton C reduced, which proves the necessity of streamlining procedures, as recognised in the Marrakesh Accords. With regard to international emissions trading it will be of high importance to build on experience with past national emissions trading schemes in order to keep transaction costs low. However, international trading schemes of the type envisaged under the Kyoto Protocol are likely to have significant issues that have not been addressed in previous national experience. In addition to transaction costs, we determine country risk premia to account for the fact that projects in different states may induce different levels of risk of default or project failure. --

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 03-59.

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Date of creation: 2003
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Handle: RePEc:zbw:zewdip:1381

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Related research
Keywords: transaction costs; risk premia; Kyoto Protocol; emissions trading; small scale projects;

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Find related papers by JEL classification:
Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Woerdman, Edwin, 2001. "Emissions trading and transaction costs: analyzing the flaws in the discussion," Ecological Economics, Elsevier, vol. 38(2), pages 293-304, August. [Downloadable!] (restricted)
  2. Stavins, Robert, 2004. "Environmental Economics," Discussion Papers dp-04-54, Resources For the Future. [Downloadable!]
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  3. Dailami, Mansoor & Leipziger, Danny, 1997. "Infrastructure project finance and capital flows : a new perspective," Policy Research Working Paper Series 1861, The World Bank. [Downloadable!]
  4. Richard Cantor & Frank Packer, 1996. "Determinants and impacts of sovereign credit ratings," Research Paper 9608, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
  5. Aidt, T.S.Toke Skovsgaard & Dutta, Jayasri, 2004. "Transitional politics: emerging incentive-based instruments in environmental regulation," Journal of Environmental Economics and Management, Elsevier, vol. 47(3), pages 458-479, May. [Downloadable!] (restricted)
  6. Joskow, Paul L & Schmalensee, Richard & Bailey, Elizabeth M, 1998. "The Market for Sulfur Dioxide Emissions," American Economic Review, American Economic Association, vol. 88(4), pages 669-85, September. [Downloadable!] (restricted)
  7. Jotzo, Frank & Michaelowa, Axel, 2001. "Estimating the CDM Market Under the Bonn Agreement," Discussion Paper Series 26160, Hamburg Institute of International Economics. [Downloadable!]
  8. Lata Gangadharan, 2000. "Transaction Costs in Pollution Markets: An Empirical Study," Land Economics, University of Wisconsin Press, vol. 76(4), pages 601-614. [Downloadable!] (restricted)
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  1. Alfred Endres & Cornelia Ohl, 2005. "Kyoto, Europe?—An Economic Evaluation of the European Emission Trading Directive," European Journal of Law and Economics, Springer, vol. 19(1), pages 17-39, January. [Downloadable!] (restricted)
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